NASHVILLE, Tenn., Nov. 4, 2020 /PRNewswire/ -- Brookdale
Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company")
announced results for the quarter ended September 30,
2020.
THIRD QUARTER 2020 HIGHLIGHTS
- During the quarter, the Company completed a lease restructuring
transaction with Ventas, Inc. ("Ventas") and reduced its expected
aggregate cash rent by approximately $500
million over the remaining, unchanged initial lease term
ending December 31, 2025.
- Liquidity was $491 million at
September 30, 2020, and the Company
completed two refinancing transactions during the quarter resulting
in no significant debt maturities until 2022.
- 95% of the Company's communities are open for move-ins on
October 31, 2020, reflecting the
Company's strong infection control protocols and focus on
testing.
- Same community RevPOR increased sequentially by 60 basis
points.
Lucinda ("Cindy") Baier, Brookdale's President and CEO, said,
"During the third quarter, we built upon our prior successful
efforts to effectively navigate through the pandemic with
operational improvements and transactions to strengthen our
financial position. We've been an agile, learning organization and
continue our efforts to innovate for our residents' enjoyment and
to welcome more seniors into our communities. On October 31, 2020, 95% of our communities were
open to move-ins and approximately 1% of our residents had current
COVID-19 positive test results. During the quarter, we completed
the most significant lease improvement in our history as well as
two important refinancing transactions. We have no large debt
maturities until 2022. We have been focused on both mission and
margin and I am very proud of our associates' dedication to the
health and well-being of our residents, patients and each
other."
SUMMARY OF THIRD QUARTER RESULTS
Consolidated
The table below presents a summary of consolidated operating
results.
|
|
Year-Over-Year
Increase / (Decrease)
|
|
Change
Attributable To:
|
($ in
millions)
|
3Q
2020
|
3Q
2019
|
Amount
|
Percent
|
|
COVID-19
|
Transactions
|
Lease
Standard
|
Resident fee
revenue
|
$
|
700.8
|
|
$
|
801.2
|
|
$
|
(100.4)
|
|
(12.5)
|
%
|
|
See note
(1)
|
$
|
(20.0)
|
|
$
|
(8.0)
|
|
|
Management fee
revenue
|
$
|
5.7
|
|
$
|
13.6
|
|
$
|
(7.9)
|
|
(58.1)
|
%
|
|
—
|
|
$
|
(7.1)
|
|
—
|
|
|
Other operating
income
|
$
|
10.8
|
|
—
|
|
$
|
10.8
|
|
NM
|
|
|
$
|
10.8
|
|
—
|
|
—
|
|
|
Facility operating
expense
|
$
|
570.5
|
|
$
|
615.7
|
|
$
|
(45.2)
|
|
(7.3)
|
%
|
|
$
|
24.5
|
|
$
|
(19.3)
|
|
$
|
(14.0)
|
|
|
General and
administrative
expense
|
$
|
54.1
|
|
$
|
56.4
|
|
$
|
(2.3)
|
|
(4.1)
|
%
|
|
—
|
|
—
|
|
—
|
|
|
Net income
(loss)
|
$
|
(125.0)
|
|
$
|
(78.5)
|
|
$
|
46.5
|
|
59.2
|
%
|
|
See note
(1)
|
See note
(1)
|
$
|
6.0
|
|
(1)
|
Adjusted EBITDA
(2)
|
$
|
(64.0)
|
|
$
|
80.4
|
|
$
|
(144.4)
|
|
NM
|
|
|
See note
(1)
|
$
|
(102.1)
|
|
$
|
6.0
|
|
|
One-time cash
lease
payment
|
$
|
119.2
|
|
$
|
—
|
|
$
|
119.2
|
|
NM
|
|
|
—
|
|
$
|
119.2
|
|
$
|
—
|
|
|
Adjusted EBITDA,
excluding one-time
cash lease payment
|
$
|
55.2
|
|
$
|
80.4
|
|
$
|
(25.2)
|
|
(31.3)
|
%
|
|
See note
(1)
|
$
|
17.1
|
|
$
|
6.0
|
|
|
|
|
(1)
|
Estimated lost
resident fee revenue attributable to COVID-19 was $91.6 million for
the third quarter of 2020. The change in net income (loss)
attributable to COVID-19 and transactions and the change in
Adjusted EBITDA attributable to COVID-19 are not presented as
certain impacts are not available without unreasonable effort. The
change attributable to the lease standard represents the 2019
impact of the timing of the revenue and cost recognition associated
with residency agreements related to the adoption of ASC
842.
|
(2)
|
Adjusted EBITDA is a
financial measure that is not calculated in accordance with GAAP.
See "Reconciliations of Non-GAAP Financial Measures" for the
Company's definition of such measure, reconciliations to the most
comparable GAAP financial measures, and other important information
regarding the use of the Company's non-GAAP financial measures.
Unless otherwise indicated, Adjusted EBITDA for the third quarter
of 2020 includes the $119.2 million one-time cash lease payment
made to Ventas in connection with the Company's lease restructuring
transaction effective July 26, 2020 ("one-time cash lease
payment").
|
- Resident fee revenue.
-
- Excluding the impact of transactions and the lease accounting
standard, consolidated resident fee revenue decreased 9.4% over the
prior year quarter.
- Consolidated RevPAR decreased $303, or 7.4%, to $3,806 compared to the prior year third quarter
as a result of a decrease in consolidated weighted average
occupancy of 890 basis points, offset by an increase in
consolidated RevPOR of $176, or 3.6%,
to $5,056.
- Consolidated senior housing occupancy was 75.0% as of
September 30, 2020 compared to 77.8%
as of June 30, 2020. The Company
estimates that the COVID-19 pandemic resulted in $76.5 million and $15.1
million of lost resident fee revenue for its consolidated
senior housing and Health Care Services segments, respectively, for
the third quarter of 2020, based on its pre-COVID-19
expectations.
- The implementation of the Patient-Driven Grouping Model
("PDGM") resulted in an additional decrease to revenue for home
health services.
- Management fee revenue. The decrease was primarily due
to the transition of management arrangements on 64 net communities
since July 1, 2019, generally for
management arrangements on certain former unconsolidated ventures
in which the Company sold its interest and interim management
arrangements on formerly leased communities.
- Other operating income.
-
- During the second quarter and third quarter of 2020, the
Company accepted $33.5 million and
$2.6 million, respectively, of cash
for grants from the Public Health and Social Services Emergency
Fund administered by the U.S. Department of Health & Human
Services (the "Provider Relief Fund"). The grants are subject to
the terms and conditions of the program, including that such funds
may only be used to prevent, prepare for, and respond to COVID-19
and will reimburse only for healthcare related expenses or lost
revenues that are attributable to COVID-19.
- The Company recognized $8.6
million of grants from the Provider Relief Fund and
$2.2 million from other government
grants as other operating income during the third quarter of
2020.
- Facility operating expense.
-
- Excluding the impact of transactions, the lease accounting
standard, and incremental direct COVID-19 costs, facility operating
expense decreased $36.4 million, or
6.3%, primarily due to decreases in certain costs as the Company
intentionally scaled back certain activities in response to the
COVID-19 pandemic and a decrease in labor costs for home health
services as a result of the lower census and as the Company
adjusted its home health services operational structure, to better
align its facility operating expenses and business model with the
new payment model. The decreases were partially offset by the
impact of wage rate increases on labor expenses.
- The Company incurred $24.5
million of incremental direct costs during the third quarter
of 2020 to address the COVID-19 pandemic, including costs for:
acquisition of personal protective equipment ("PPE"), medical
equipment, and cleaning and disposable food service supplies,
enhanced cleaning and environmental sanitation, increased labor,
increased workers compensation and health plan expense, consulting
and professional services, and COVID-19 testing of residents and
associates where not otherwise covered by government payor or
third-party insurance sources.
- General and administrative expense. The decrease in
general and administrative expense was primarily attributable to a
reduction in the Company's travel costs as it intentionally scaled
back such activities and a reduction in the Company's corporate
headcount, as it scaled its general and administrative costs in
connection with community dispositions. The decrease was partially
offset by a $2.3 million increase in
transaction and organizational restructuring costs compared to the
prior year quarter.
- Net income (loss). The decrease in net income (loss)
compared to the prior year quarter was primarily attributable to
the revenue and facility operating expense factors previously
discussed.
- Adjusted EBITDA. The decrease in Adjusted EBITDA
compared to the prior year quarter was primarily attributable to
the $119.2 million one-time cash
lease payment, as well as the revenue and facility operating
expense factors previously discussed.
- COVID-19 Impact.
-
- The Company has adopted a framework for determining when to
ease restrictions at each of its communities based on several
criteria, including regulatory requirements and guidance,
completion of baseline testing at the community, and the community
having no current confirmed positive COVID-19 cases. Under this
framework, the Company began easing restrictions on a
community-by-community basis in July
2020 where regulatory requirements and guidance allow, which
easing may have included permitting outdoor, and in some cases,
indoor visits with families, reduced capacity communal dining, and
limited communal activities programming. During the third quarter
of 2020, the Company also returned to using in-person prospective
resident visits for a majority of its communities. However, several
large markets continue with virtual-only prospective resident
visits. Approximately 98% of the Company's communities were
accepting new residents by the end of September 2020 compared to 86% of its communities
as of June 30, 2020.
- In July 2020, the Company
completed proactive baseline testing of residents and associates at
all of its communities. Through October 31,
2020, the Company's testing program has accumulated over
185,000 test results. Approximately 1% of the Company's residents
on October 31, 2020 are currently
confirmed positive for COVID-19.
- The number of move-ins increased as the third quarter of 2020
progressed, lessening the decline in occupancy in sequential
months. The year-over-year decrease in monthly move-ins of the
Company's same community portfolio has moderated from 64.2% in
April 2020 to 22.9% in September 2020, and move-ins for the third
quarter of 2020 improved 38.0% sequentially from the second quarter
of 2020. Despite the improvement in move-ins, the Company's same
community weighted average occupancy has declined in each month of
the pandemic, from 83.0% in March
2020 to 74.4% in September
2020, and was 74.0% in October
2020.
- The Company's home health average daily census increased
sequentially from the second quarter of 2020 after decreasing in
March and April 2020 due to lower
occupancy in its communities and fewer elective medical procedures
and hospital discharges, resulting in a 14.4% year-over-year
decline in home health average daily census for the third quarter
of 2020.
Same Community Senior Housing (Independent Living (IL),
Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of same community operating
results and metrics of the Company's consolidated senior housing
portfolio.(3)
|
|
|
Year-Over-Year
Increase / (Decrease)
|
|
Sequential
Increase / (Decrease)
|
($ in millions,
except RevPAR and RevPOR)
|
3Q
2020
|
3Q
2019
|
Amount
|
Percent
|
2Q
2020
|
Amount
|
Percent
|
RevPAR
|
$
|
3,821
|
|
$
|
4,141
|
|
$
|
(320)
|
|
(7.7)%
|
$
|
3,979
|
|
$
|
(158)
|
|
(4.0)%
|
Weighted average
occupancy
|
75.6
|
%
|
84.8
|
%
|
(920)
|
bps
|
n/a
|
79.1
|
%
|
(350)
|
bps
|
n/a
|
RevPOR
|
$
|
5,057
|
|
$
|
4,885
|
|
$
|
172
|
|
3.5%
|
$
|
5,028
|
|
$
|
29
|
|
0.6%
|
Facility operating
expense
|
$
|
435.1
|
|
$
|
434.0
|
|
$
|
1.1
|
|
0.3%
|
$
|
462.0
|
|
$
|
(26.9)
|
|
(5.8)%
|
|
|
(3)
|
The same community
portfolio includes operating results and data for 631 communities
utilizing the Company's methodology for determining same store
communities, which excludes communities acquired or disposed of
since the beginning of the prior year, communities classified as
assets held for sale, certain communities planned for disposition,
certain communities that have undergone or are undergoing
expansion, redevelopment, and repositioning projects, certain
communities that have expansion, redevelopment, and repositioning
projects that are anticipated to be under construction in the
current year, and certain communities that have experienced a
casualty event that significantly impacts their operations. To aid
in comparability, same community operating results and data exclude
(i) hurricane and other natural disaster expense of $2.3 million,
$0.2 million, and $1.2 million for the third and second quarters of
2020 and third quarter of 2019, respectively, and (ii) for the 2019
period the additional resident fee revenue and facility operating
expense recognized as a result of the application of the lease
accounting standard ASC 842 of approximately $7.3 million and $12.8
million, respectively. As presented herein, same community facility
operating expense includes the direct costs incurred to respond to
the COVID-19 pandemic.
|
- Resident fees. Same community resident fees decreased
$47.4 million to $565.9 million attributable to the decrease in
occupancy, partially offset by the increase in RevPOR.
- Facility operating expense.
-
- The year-over-year increase was primarily due to $20.4 million of incremental direct costs
incurred during the third quarter of 2020 to respond to the
COVID-19 pandemic.
- The increase in same community facility operating expense
compared to the prior year quarter was partially offset by
decreases in repairs and maintenance costs and food and supplies
costs due to the reduced occupancy during the period.
Health Care Services
|
|
Increase /
(Decrease)
|
($ in
millions)
|
3Q
2020
|
3Q
2019
|
Amount
|
Percent
|
Resident fee
revenue
|
$
|
89.9
|
|
$
|
111.8
|
|
$
|
(21.9)
|
|
(19.6)
|
%
|
Other operating
income
|
5.9
|
|
—
|
|
5.9
|
|
NM
|
|
Facility operating
expense
|
94.3
|
|
107.0
|
|
(12.7)
|
|
(11.9)
|
%
|
- Resident fee revenue.
-
- Health Care Services revenue decreased primarily due to the
decline in the Company's home health average daily census as a
result of lower occupancy in the Company's communities and fewer
elective medical procedures and hospital discharges.
- The implementation of the PDGM, an alternate home health case
mix adjustment methodology with a 30-day unit of payment, beginning
January 1, 2020, also resulted in a
decrease in revenue for home health services.
- Facility operating expense.
-
- The year-over-year decrease in facility operating expense was
primarily attributable to a decrease in labor costs for home health
services as a result of the lower census and as the Company
adjusted its home health services operational structure, to better
align its facility operating expenses and business model with the
new payment model.
- The decrease in facility operating expenses was partially
offset by $2.4 million of incremental
direct costs to respond to the COVID-19 pandemic incurred during
the third quarter of 2020.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities, Adjusted Free Cash
Flow, and liquidity.
|
|
Increase /
(Decrease)
|
($ in
millions)
|
3Q
2020
|
3Q
2019
|
Amount
|
Percent
|
Net cash provided by
(used in) operating activities
|
$
|
(77.2)
|
|
$
|
69.2
|
|
$
|
(146.4)
|
|
NM
|
Adjusted Free Cash
Flow (4)
|
(114.3)
|
|
(13.6)
|
|
(100.7)
|
|
NM
|
|
|
Increase /
(Decrease)
|
($ in
millions)
|
September 30,
2020
|
June 30,
2020
|
Amount
|
Percent
|
Unrestricted cash and
cash equivalents
|
$
|
354.6
|
|
$
|
452.4
|
|
$
|
(97.8)
|
|
(21.6)
|
%
|
Marketable
securities
|
136.1
|
|
109.9
|
|
26.2
|
|
23.8
|
%
|
Availability on
secured credit facility
|
—
|
|
37.9
|
|
(37.9)
|
|
NM
|
|
Total
Liquidity
|
$
|
490.7
|
|
$
|
600.2
|
|
$
|
(109.5)
|
|
(18.2)
|
%
|
|
|
(4)
|
Adjusted Free Cash
Flow is a financial measure that is not calculated in accordance
with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for
the Company's definition of such measure, reconciliations to the
most comparable GAAP financial measure and other important
information regarding the use of the Company's non-GAAP financial
measures. Adjusted Free Cash Flow for the third quarter of 2020
includes the $119.2 million one-time cash lease payment.
|
- Net cash provided by (used in) operating
activities. The year-over-year decrease in net cash
provided by (used in) operating activities was primarily
attributable to the $119.2 million
one-time cash lease payment and a decrease in same community
revenue compared to the prior year period.
- Adjusted Free Cash Flow. The decrease in Adjusted Free
Cash Flow compared to the prior year third quarter was attributable
to the decrease in net cash provided by (used in) operating
activities partially offset by a $36.2
million decrease in non-development capital expenditures,
net compared to the prior year period.
- Total Liquidity. Total liquidity as of
September 30, 2020, decreased $109.5 million from June 30, 2020, primarily attributable to the
$119.2 million one-time cash lease
payment. On August 31, 2020, the
Company terminated its $250 million
revolving credit facility and obtained $266.9 million of non-recourse mortgage financing
on 16 communities, most of which had secured the credit facility
prior to its termination. At the closing, the Company repaid the
$166.4 million outstanding principal
amount under the credit facility, together with accumulated
interest, without payment of any termination fee or penalty, and
the Company cash collateralized the letters of credit outstanding
under the credit facility.
TRANSACTION AND FINANCING UPDATE
- Ventas Transaction: On July 26,
2020, the Company entered into definitive agreements with
Ventas to restructure its 120 community (10,174 units) triple-net
master lease arrangements, as further described in the press
release issued on July 27, 2020. In
addition, the Company conveyed to Ventas five communities in full
satisfaction of $78.4 million
principal amount of indebtedness secured by the communities and
manages the communities subsequent to the closing. Pursuant to the
multi-part transaction, the Company paid a $119.2 million one-time cash payment to Ventas on
July 27, 2020 and reduced the
Company's annual rent under the amended and restated master
lease.
- Refinancing Activity: During August and September 2020, the Company closed on two
non-recourse mortgage debt financing transactions totaling
$487.4 million, with the proceeds
used to refinance the majority of the Company's remaining 2021
maturities and repay the outstanding amount on the Company's former
revolving credit facility as described above.
- Community Dispositions: During the third quarter of
2020, the Company completed the sale of one owned community (297
units) for total cash proceeds of $32.6
million, net of transaction costs, and terminated the lease
on two communities (148 units).
- Leased Community Acquisition: On August 31, 2020, the Company acquired one
formerly leased community (103 units) pursuant to the exercise of a
purchase option for a purchase price of $25.0 million.
OUTLOOK
Given the unprecedented nature of COVID-19 and rapidly changing
developments, the Company will continue to be agile and adjust its
local community response to help protect its residents, associates,
and patients. As the Company cannot predict the ultimate impact of
the duration, severity, and breadth of the pandemic for
the United States, key factors
that may impact the Company's financial performance and liquidity
for the remainder of 2020 include:
- The Company's consolidated weighted average occupancy was 73.8%
for October 2020 and 95% of
communities were accepting move-ins on October 31, 2020. On average, the Company has
seen move-in volume at communities with fewer restrictions fare
better than those with higher restrictions.
- The Company is pleased that it has welcomed new residents into
its communities during the pandemic and is monitoring the current
resurgence. Barring a severe resurgence, the Company expects the
sequential decline in quarterly consolidated occupancy will again
moderate.
- The Company expects to increase its marketing investments for
communities that are able to welcome visitors and move-ins to drive
future resident awareness and referrals.
- Communities impacted by COVID-19 infections are likely to incur
increased costs for the use of a higher volume of PPE and medical
supplies and other related expenses.
- The Company's census for Health Care Services is expected to
move directionally with elective medical procedure and hospital
discharge trends and the occupancy trend within the Company's
senior housing segment.
- The Company has applied for additional grants made available
pursuant to the Provider Relief Fund's Phase 2 General
Distribution, generally related to the Company's senior housing
segments. The amount of such grants are expected to be based on 2%
of a portion of the Company's 2018 revenues from patient care, and
the Company expects to receive up to approximately $50 million of grants from this allocation. There
can be no assurance that the Company will qualify for, or receive,
grants in the amount it expects.
- In response to the COVID-19 pandemic, the Company delayed or
canceled a number of elective capital expenditure projects. As a
result, the Company expects the fourth quarter non-development
capital expenditures, net of anticipated lessor reimbursements, to
be approximately $35 million, and
development capital expenditures to be approximately $5 million. For the full year, this reflects a
$50 million and $15 million reduction to pre-pandemic
non-development and development plans, respectively.
- The Company expects that changes in working capital will
require the use of approximately $25
million of cash in the fourth quarter of 2020.
SUPPLEMENTAL INFORMATION
The Company will post on its website at
www.brookdale.com/investor supplemental information relating to the
Company's third quarter 2020 results, an updated investor
presentation, and a copy of this earnings release. The supplemental
information and a copy of this earnings release will also be
furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's management will conduct a conference call to review
the financial results for the third quarter of 2020 on
November 5, 2020 at 9:00 AM ET.
The conference call can be accessed by dialing (866) 900-2996 (from
within the U.S.) or (706) 643-2685 (from outside of the U.S.) ten
minutes prior to the scheduled start and referencing
"Brookdale".
A webcast of the conference call will be available to the public
on a listen-only basis at www.brookdale.com/investor. Please allow
extra time prior to the call to visit the site and download the
necessary software required to listen to the internet broadcast. A
replay of the webcast will be available through the website
following the call.
For those who cannot listen to the live call, a replay will be
available until 11:59 PM ET on
November 19, 2020 by dialing (855)
859-2056 (from within the U.S.) or (404) 537-3406 (from outside of
the U.S.) and referencing access code "3699832".
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the leading operator of senior
living communities throughout the United
States. The Company is committed to providing senior living
solutions primarily within properties that are designed,
purpose-built, and operated to provide the highest-quality service,
care, and living accommodations for residents. Brookdale operates
and manages independent living, assisted living, memory care, and
continuing care retirement communities, with 726 communities in 44
states and the ability to serve approximately 65,000 residents as
of September 30, 2020. The Company also offers a range of home
health, hospice, and outpatient therapy services to over 17,000
patients as of that date. Brookdale's stock is traded on the New
York Stock Exchange under the ticker symbol BKD.
DEFINITIONS OF RevPAR AND RevPOR
RevPAR, or average monthly senior housing resident fee revenue
per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue and entrance fee amortization,
and, for the 2019 periods, the additional resident fee revenue
recognized as a result of the application of the lease accounting
standard ASC 842), divided by the weighted average number of
available units in the corresponding portfolio for the period,
divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue
per occupied unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue and entrance fee amortization,
and, for the 2019 periods, the additional resident fee revenue
recognized as a result of the application of the lease accounting
standard ASC 842), divided by the weighted average number of
occupied units in the corresponding portfolio for the period,
divided by the number of months in the period.
SAFE HARBOR
Certain statements in this press release and the associated
earnings conference call may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to various
risks and uncertainties and include all statements that are not
historical statements of fact and those regarding the Company's
intent, belief or expectations, including those related to the
COVID-19 pandemic. Forward-looking statements are generally
identifiable by use of forward-looking terminology such as "may,"
"will," "should," "could," "would," "potential," "intend,"
"expect," "endeavor," "seek," "anticipate," "estimate," "believe,"
"project," "predict," "continue," "plan," "target," or other
similar words or expressions. These forward-looking statements are
based on certain assumptions and expectations, and the Company's
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Although the Company believes
that expectations reflected in any forward-looking statements are
based on reasonable assumptions, it can give no assurance that its
assumptions or expectations will be attained, and actual results
and performance could differ materially from those projected.
Factors which could have a material adverse effect on the Company's
operations and future prospects or which could cause events or
circumstances to differ from the forward-looking statements
include, but are not limited to: the impacts of the COVID-19
pandemic, including the response efforts of federal, state, and
local government authorities, businesses, individuals and the
Company, on the Company's business, results of operations, cash
flow, liquidity, and strategic initiatives, including plans for
future growth, which will depend on many factors, some of which
cannot be foreseen, including the duration, severity, and breadth
of the pandemic and any resurgence of the disease, the impact of
COVID-19 on the nation's economy and debt and equity markets and
the local economies in the Company's markets, the development and
availability of COVID-19 testing, therapeutic agents, and vaccines
and the prioritization of such resources among businesses and
demographic groups, government financial and regulatory relief
efforts that may become available to business and individuals,
including our ability to qualify for and satisfy the terms and
conditions of financial relief; perceptions regarding the safety of
senior living communities during and after the pandemic, changes in
demand for senior living communities and the Company's ability to
adapt its sales and marketing efforts to meet that demand, changes
in the acuity levels of the Company's new residents, the
disproportionate impact of COVID-19 on seniors generally and those
residing in the Company's communities, the duration and costs of
the Company's response efforts, including increased equipment,
supplies, labor, litigation, testing, and other expenses, the
impact of COVID-19 on the Company's ability to complete financings,
refinancings, or other transactions (including dispositions) or to
generate sufficient cash flow to cover required interest and lease
payments and to satisfy financial and other covenants in the
Company's debt and lease documents, increased regulatory
requirements, including unfunded mandatory testing, increased
enforcement actions resulting from COVID-19, including those that
may limit the Company's collection efforts for delinquent accounts
and the frequency and magnitude of legal actions and liability
claims that may arise due to COVID-19 or the Company's response
efforts; events which adversely affect the ability of seniors to
afford resident fees, including downturns in the economy, housing
markets, consumer confidence or the equity markets and unemployment
among family members, which may be adversely impacted by the
pandemic; changes in reimbursement rates, methods or timing under
governmental reimbursement programs including the Medicare and
Medicaid programs; the impact of ongoing healthcare reform efforts;
the effects of senior housing construction and development,
oversupply and increased competition; disruptions in the financial
markets, including those related to the pandemic, that affect the
Company's ability to obtain financing or extend or refinance debt
as it matures and the Company's financing costs; the risks
associated with current global economic conditions, including
changes related to the pandemic, and general economic factors such
as inflation, the consumer price index, commodity costs, fuel and
other energy costs, costs of salaries, wages, benefits, and
insurance, interest rates, and tax rates; the impact of seasonal
contagious illness or an outbreak of COVID-19 or other contagious
disease in the markets in which the Company operates; the Company's
ability to generate sufficient cash flow to cover required interest
and long-term lease payments and to fund its planned capital
projects, which may be adversely affected by the pandemic; the
effect of the Company's indebtedness and long-term leases on its
liquidity; the effect of the Company's non-compliance with any of
its debt or lease agreements (including the financial covenants
contained therein), including the risk of lenders or lessors
declaring a cross default in the event of non-compliance with any
such agreements and the risk of loss of the Company's property
securing leases and indebtedness due to any resulting lease
terminations and foreclosure actions; the potential phasing out of
LIBOR which may increase the costs of the Company's debt
obligations; increased competition for or a shortage of personnel
or wage pressures resulting from increased competition, low
unemployment levels, minimum wage increases and changes in overtime
laws, and union activity; failure to maintain the security and
functionality of the Company's information systems, to prevent a
cybersecurity attack or breach, or to comply with applicable
privacy and consumer protection laws, including HIPAA; the
Company's inability to achieve or maintain profitability; the
Company's ability to complete pending or expected disposition,
acquisition, or other transactions on agreed upon terms or at all,
including in respect of the satisfaction of closing conditions, the
risk that regulatory approvals are not obtained or are subject to
unanticipated conditions, and uncertainties as to the timing of
closing, and the Company's ability to identify and pursue any such
opportunities in the future; the Company's ability to obtain
additional capital on terms acceptable to the Company; the
Company's ability to complete its capital expenditures in
accordance with its plans; the Company's ability to identify and
pursue development, investment, and acquisition opportunities and
its ability to successfully integrate acquisitions; competition for
the acquisition of assets; delays in obtaining regulatory
approvals; terminations, early or otherwise, or non-renewal of
management agreements; conditions of housing markets, regulatory
changes, acts of nature, and the effects of climate change in
geographic areas where the Company is concentrated; terminations of
the Company's resident agreements and vacancies in its living
spaces, which may be adversely impacted by the pandemic; departures
of key officers and potential disruption caused by changes in
management; risks related to the implementation of the Company's
strategy, including initiatives undertaken to execute on its
strategic priorities and their effect the Company's results;
actions of activist stockholders, including a proxy contest; market
conditions and capital allocation decisions that may influence the
Company's determination from time to time whether to purchase any
shares under its existing share repurchase program and the
Company's ability to fund any repurchases; the Company's ability to
maintain consistent quality control; a decrease in the overall
demand for senior housing, which may be adversely impacted by the
pandemic; environmental contamination at any of the Company's
communities; failure to comply with existing environmental laws;
costs to defend against, or an adverse determination or resolution
of, complaints filed against the Company; the cost and difficulty
of complying with increasing and evolving regulation; costs to
respond to, and adverse determinations resulting from, government
reviews, audits and investigations; unanticipated costs to comply
with legislative or regulatory developments; as well as other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission ("SEC"), including those set
forth in the Company's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q. When considering forward-looking statements,
you should keep in mind the risk factors and other cautionary
statements in such SEC filings. Readers are cautioned not to place
undue reliance on any of these forward-looking statements, which
reflect management's views as of the date of this press release
and/or associated earnings call. The Company cannot guarantee
future results, levels of activity, performance or achievements,
and, except as required by law, the Company expressly disclaims any
obligation to release publicly any updates or revisions to any
forward-looking statements to reflect any change in its
expectations with regard thereto or change in events, conditions,
or circumstances on which any statement is based.
Condensed
Consolidated Statements of Operations
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in thousands,
except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue and other
operating income
|
|
|
|
|
|
|
|
Resident
fees
|
$
|
700,771
|
|
|
$
|
801,237
|
|
|
$
|
2,215,107
|
|
|
$
|
2,412,579
|
|
Management
fees
|
5,669
|
|
|
13,564
|
|
|
120,460
|
|
|
44,756
|
|
Reimbursed costs
incurred on behalf of managed communities
|
90,775
|
|
|
194,148
|
|
|
315,003
|
|
|
613,115
|
|
Other operating
income
|
10,765
|
|
|
—
|
|
|
37,458
|
|
|
—
|
|
Total revenue and
other operating income
|
807,980
|
|
|
1,008,949
|
|
|
2,688,028
|
|
|
3,070,450
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
Facility operating
expense (excluding facility depreciation and
amortization of $81,854, $86,213, $253,126, and
$261,110,
respectively)
|
570,530
|
|
|
615,717
|
|
|
1,765,046
|
|
|
1,792,057
|
|
General and
administrative expense (including non-cash stock-
based compensation expense of $6,136, $5,929,
$18,212,
and $18,315, respectively)
|
54,138
|
|
|
56,409
|
|
|
161,251
|
|
|
170,296
|
|
Facility operating
lease expense
|
51,620
|
|
|
67,253
|
|
|
178,480
|
|
|
203,610
|
|
Depreciation and
amortization
|
87,821
|
|
|
93,550
|
|
|
271,713
|
|
|
284,462
|
|
Asset
impairment
|
8,213
|
|
|
2,094
|
|
|
96,729
|
|
|
6,254
|
|
Loss (gain) on
facility lease termination and modification, net
|
—
|
|
|
—
|
|
|
—
|
|
|
2,006
|
|
Costs incurred on
behalf of managed communities
|
90,775
|
|
|
194,148
|
|
|
315,003
|
|
|
613,115
|
|
Total operating
expense
|
863,097
|
|
|
1,029,171
|
|
|
2,788,222
|
|
|
3,071,800
|
|
Income (loss) from
operations
|
(55,117)
|
|
|
(20,222)
|
|
|
(100,194)
|
|
|
(1,350)
|
|
|
|
|
|
|
|
|
|
Interest
income
|
607
|
|
|
2,162
|
|
|
4,305
|
|
|
8,059
|
|
Interest
expense:
|
|
|
|
|
|
|
|
Debt
|
(36,908)
|
|
|
(44,344)
|
|
|
(117,645)
|
|
|
(135,180)
|
|
Financing lease
obligations
|
(11,908)
|
|
|
(16,567)
|
|
|
(37,082)
|
|
|
(49,959)
|
|
Amortization of
deferred financing costs and debt discount
|
(1,730)
|
|
|
(1,167)
|
|
|
(4,601)
|
|
|
(3,132)
|
|
Gain (loss) on debt
modification and extinguishment, net
|
(7,917)
|
|
|
(2,455)
|
|
|
11,107
|
|
|
(5,194)
|
|
Equity in earnings
(loss) of unconsolidated ventures
|
(293)
|
|
|
(2,057)
|
|
|
(863)
|
|
|
(3,574)
|
|
Gain (loss) on sale
of assets, net
|
2,209
|
|
|
579
|
|
|
374,019
|
|
|
2,723
|
|
Other non-operating
income (loss)
|
948
|
|
|
3,763
|
|
|
4,598
|
|
|
9,950
|
|
Income (loss) before
income taxes
|
(110,109)
|
|
|
(80,308)
|
|
|
133,644
|
|
|
(177,657)
|
|
Benefit (provision)
for income taxes
|
(14,884)
|
|
|
1,800
|
|
|
(7,560)
|
|
|
488
|
|
Net income
(loss)
|
(124,993)
|
|
|
(78,508)
|
|
|
126,084
|
|
|
(177,169)
|
|
Net (income) loss
attributable to noncontrolling interest
|
18
|
|
|
50
|
|
|
55
|
|
|
646
|
|
Net income (loss)
attributable to Brookdale Senior Living Inc.
common stockholders
|
$
|
(124,975)
|
|
|
$
|
(78,458)
|
|
|
$
|
126,139
|
|
|
$
|
(176,523)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to Brookdale Senior
Living Inc. common stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.68)
|
|
|
$
|
(0.42)
|
|
|
$
|
0.69
|
|
|
$
|
(0.95)
|
|
Diluted
|
$
|
(0.68)
|
|
|
$
|
(0.42)
|
|
|
$
|
0.69
|
|
|
$
|
(0.95)
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
183,244
|
|
|
185,516
|
|
|
183,535
|
|
|
186,130
|
|
Diluted
|
183,244
|
|
|
185,516
|
|
|
183,668
|
|
|
186,130
|
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
September 30,
2020
|
|
December 31,
2019
|
Cash and cash
equivalents
|
$
|
354,621
|
|
|
$
|
240,227
|
|
Marketable
securities
|
136,136
|
|
|
68,567
|
|
Restricted
cash
|
35,206
|
|
|
26,856
|
|
Accounts receivable,
net
|
113,820
|
|
|
133,613
|
|
Assets held for
sale
|
8,324
|
|
|
42,671
|
|
Prepaid expenses and
other current assets, net
|
73,977
|
|
|
84,241
|
|
Total current
assets
|
722,084
|
|
|
596,175
|
|
Property, plant and
equipment and leasehold intangibles, net
|
5,127,167
|
|
|
5,109,834
|
|
Operating lease
right-of-use assets
|
843,265
|
|
|
1,159,738
|
|
Other assets,
net
|
315,411
|
|
|
328,686
|
|
Total
assets
|
$
|
7,007,927
|
|
|
$
|
7,194,433
|
|
|
|
|
|
Current
liabilities
|
$
|
719,010
|
|
|
$
|
1,046,972
|
|
Long-term debt, less
current portion
|
3,857,820
|
|
|
3,215,710
|
|
Financing lease
obligations, less current portion
|
547,922
|
|
|
771,434
|
|
Operating lease
obligations, less current portion
|
874,657
|
|
|
1,277,178
|
|
Other
liabilities
|
164,348
|
|
|
184,414
|
|
Total
liabilities
|
6,163,757
|
|
|
6,495,708
|
|
Total Brookdale
Senior Living Inc. stockholders' equity
|
841,856
|
|
|
696,356
|
|
Noncontrolling
interest
|
2,314
|
|
|
2,369
|
|
Total
equity
|
844,170
|
|
|
698,725
|
|
Total liabilities and
equity
|
$
|
7,007,927
|
|
|
$
|
7,194,433
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Nine Months Ended
September 30,
|
(in
thousands)
|
2020
|
|
2019
|
Cash Flows from
Operating Activities
|
|
|
|
Net income
(loss)
|
$
|
126,084
|
|
|
$
|
(177,169)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
Loss (gain) on debt
modification and extinguishment, net
|
(11,107)
|
|
|
5,194
|
|
Depreciation and
amortization, net
|
276,314
|
|
|
287,594
|
|
Asset
impairment
|
96,729
|
|
|
6,254
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
863
|
|
|
3,574
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
766
|
|
|
2,388
|
|
Amortization of
entrance fees
|
(1,606)
|
|
|
(1,172)
|
|
Proceeds from deferred
entrance fee revenue
|
118
|
|
|
2,902
|
|
Deferred income tax
(benefit) provision
|
(2,727)
|
|
|
(1,216)
|
|
Operating lease
expense adjustment
|
(132,276)
|
|
|
(13,626)
|
|
Loss (gain) on sale of
assets, net
|
(374,019)
|
|
|
(2,723)
|
|
Loss (gain) on
facility lease termination and modification, net
|
—
|
|
|
2,006
|
|
Non-cash stock-based
compensation expense
|
18,212
|
|
|
18,315
|
|
Non-cash management
contract termination gain
|
—
|
|
|
(640)
|
|
Other
|
(1,965)
|
|
|
(7,173)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
19,678
|
|
|
(6,756)
|
|
Prepaid expenses and
other assets, net
|
27,504
|
|
|
50,387
|
|
Prepaid insurance
premiums financed with notes payable
|
(5,823)
|
|
|
(5,875)
|
|
Trade accounts payable
and accrued expenses
|
17,002
|
|
|
(21,970)
|
|
Refundable fees and
deferred revenue
|
64,763
|
|
|
(24,007)
|
|
Operating lease assets
and liabilities for lessor capital expenditure
reimbursements
|
13,640
|
|
|
12,043
|
|
Net cash provided by
(used in) operating activities
|
132,150
|
|
|
128,330
|
|
Cash Flows from
Investing Activities
|
|
|
|
Change in lease
security deposits and lease acquisition deposits, net
|
3,399
|
|
|
(430)
|
|
Purchase of marketable
securities
|
(255,373)
|
|
|
(137,786)
|
|
Sale and maturities of
marketable securities
|
188,750
|
|
|
104,000
|
|
Capital expenditures,
net of related payables
|
(140,690)
|
|
|
(206,385)
|
|
Acquisition of assets,
net of related payables and cash received
|
(472,193)
|
|
|
(453)
|
|
Investment in
unconsolidated ventures
|
(1,809)
|
|
|
(4,294)
|
|
Distributions received
from unconsolidated ventures
|
—
|
|
|
7,454
|
|
Proceeds from sale of
assets, net
|
331,103
|
|
|
53,430
|
|
Proceeds from notes
receivable
|
2,849
|
|
|
34,109
|
|
Net cash provided by
(used in) investing activities
|
(343,964)
|
|
|
(150,355)
|
|
Cash Flows from
Financing Activities
|
|
|
|
Proceeds from
debt
|
961,833
|
|
|
318,491
|
|
Repayment of debt and
financing lease obligations
|
(518,700)
|
|
|
(404,152)
|
|
Proceeds from line of
credit
|
166,381
|
|
|
—
|
|
Repayment of line of
credit
|
(166,381)
|
|
|
—
|
|
Purchase of treasury
stock, net of related payables
|
(18,123)
|
|
|
(18,401)
|
|
Payment of financing
costs, net of related payables
|
(18,141)
|
|
|
(6,357)
|
|
Payments of employee
taxes for withheld shares
|
(4,012)
|
|
|
(3,242)
|
|
Other
|
335
|
|
|
827
|
|
Net cash provided by
(used in) financing activities
|
403,192
|
|
|
(112,834)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
191,378
|
|
|
(134,859)
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
301,697
|
|
|
450,218
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
493,075
|
|
|
$
|
315,359
|
|
Reconciliations of Non-GAAP Financial
Measures
This earnings release contains the financial measures Adjusted
EBITDA and Adjusted Free Cash Flow, which are not calculated in
accordance with U.S. generally accepted accounting principles
("GAAP"). Presentations of these non-GAAP financial measures are
intended to aid investors in better understanding the factors and
trends affecting the Company's performance and liquidity. However,
investors should not consider these non-GAAP financial measures as
a substitute for financial measures determined in accordance with
GAAP, including net income (loss), income (loss) from operations,
or net cash provided by (used in) operating activities. Investors
are cautioned that amounts presented in accordance with the
Company's definitions of these non-GAAP financial measures may not
be comparable to similar measures disclosed by other companies
because not all companies calculate non-GAAP measures in the same
manner. Investors are urged to review the reconciliations included
below of these non-GAAP financial measures from the most comparable
financial measures determined in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP performance measure that the
Company defines as net income (loss) excluding: benefit/provision
for income taxes, non-operating income/expense items, and
depreciation and amortization; and further adjusted to exclude
income/expense associated with non-cash, non-operational,
transactional, cost reduction, or organizational restructuring
items that management does not consider as part of the Company's
underlying core operating performance and that management believes
impact the comparability of performance between periods. For the
periods presented herein, such other items include non-cash
impairment charges, gain/loss on facility lease termination and
modification, operating lease expense adjustment, amortization of
deferred gain, change in future service obligation, non-cash
stock-based compensation expense, and transaction and
organizational restructuring costs. Transaction costs include those
directly related to acquisition, disposition, financing, and
leasing activity, and stockholder relations advisory matters, and
are primarily comprised of legal, finance, consulting, professional
fees, and other third party costs. Organizational restructuring
costs include those related to the Company's efforts to reduce
general and administrative expense and its senior leadership
changes, including severance and retention costs.
The Company believes that presentation of Adjusted EBITDA as a
performance measure is useful to investors because (i) it is one of
the metrics used by the Company's management for budgeting and
other planning purposes, to review the Company's historic and
prospective core operating performance, and to make day-to-day
operating decisions; (ii) it provides an assessment of operational
factors that management can impact in the short-term, namely
revenues and the controllable cost structure of the organization,
by eliminating items related to the Company's financing and capital
structure and other items that management does not consider as part
of the Company's underlying core operating performance and that
management believes impact the comparability of performance between
periods; and (iii) the Company believes that this measure is used
by research analysts and investors to evaluate the Company's
operating results and to value companies in its industry.
Adjusted EBITDA has material limitations as a performance
measure, including: (i) excluded interest and income tax are
necessary to operate the Company's business under its current
financing and capital structure; (ii) excluded depreciation,
amortization and impairment charges may represent the wear and tear
and/or reduction in value of the Company's communities, goodwill
and other assets and may be indicative of future needs for capital
expenditures; and (iii) the Company may incur income/expense
similar to those for which adjustments are made, such as gain/loss
on sale of assets, facility lease termination and modification, or
debt modification and extinguishment, non-cash stock-based
compensation expense, and transaction and other costs, and such
income/expense may significantly affect the Company's operating
results.
The table below reconciles the Company's Adjusted EBITDA from
its net income (loss).
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
$
|
(124,993)
|
|
|
$
|
(78,508)
|
|
|
$
|
126,084
|
|
|
$
|
(177,169)
|
|
Provision (benefit)
for income taxes
|
14,884
|
|
|
(1,800)
|
|
|
7,560
|
|
|
(488)
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
293
|
|
|
2,057
|
|
|
863
|
|
|
3,574
|
|
Loss (gain) on debt
modification and extinguishment, net
|
7,917
|
|
|
2,455
|
|
|
(11,107)
|
|
|
5,194
|
|
Loss (gain) on sale
of assets, net
|
(2,209)
|
|
|
(579)
|
|
|
(374,019)
|
|
|
(2,723)
|
|
Other non-operating
(income) loss
|
(948)
|
|
|
(3,763)
|
|
|
(4,598)
|
|
|
(9,950)
|
|
Interest
expense
|
50,546
|
|
|
62,078
|
|
|
159,328
|
|
|
188,271
|
|
Interest
income
|
(607)
|
|
|
(2,162)
|
|
|
(4,305)
|
|
|
(8,059)
|
|
Income (loss) from
operations
|
(55,117)
|
|
|
(20,222)
|
|
|
(100,194)
|
|
|
(1,350)
|
|
Depreciation and
amortization
|
87,821
|
|
|
93,550
|
|
|
271,713
|
|
|
284,462
|
|
Asset
impairment
|
8,213
|
|
|
2,094
|
|
|
96,729
|
|
|
6,254
|
|
Loss (gain) on
facility lease termination and modification,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
2,006
|
|
Operating lease
expense adjustment
|
(117,322)
|
|
|
(4,814)
|
|
|
(132,276)
|
|
|
(13,626)
|
|
Non-cash stock-based
compensation expense
|
6,136
|
|
|
5,929
|
|
|
18,212
|
|
|
18,315
|
|
Transaction and
organizational restructuring costs
|
6,250
|
|
|
3,910
|
|
|
11,599
|
|
|
5,005
|
|
Adjusted
EBITDA(1)
|
$
|
(64,019)
|
|
|
$
|
80,447
|
|
|
$
|
165,783
|
|
|
$
|
301,066
|
|
$100.0 million
management termination fee
|
—
|
|
|
—
|
|
|
(100,000)
|
|
|
—
|
|
$119.2 million
one-time cash lease payment
|
119,180
|
|
|
—
|
|
|
119,180
|
|
|
|
Adjusted EBITDA,
excluding $100.0 million management termination fee and $119.2
million one-time cash lease payment
|
$
|
55,161
|
|
|
$
|
80,447
|
|
|
$
|
184,963
|
|
|
$
|
301,066
|
|
|
|
(1)
|
Adjusted EBITDA
includes:
|
|
•
|
$6.0 million and
$19.0 million, respectively, of a negative, non-recurring net
impact for the three and nine months ended September 30, 2019
from the application of the lease accounting standard effective
January 1, 2019
|
|
•
|
$100.0 million
benefit for the nine months ended September 30, 2020 for the
management agreement termination fee payment received from
Healthpeak Properties, Inc. ("Healthpeak") in connection with
closing of the multi-part transaction on January 31,
2020
|
|
•
|
$119.2 million for
the three and nine months ended September 30, 2020 for the one-time
cash lease payment
|
|
•
|
$10.8 million and
$37.5 million, respectively, benefit for the three and nine months
ended September 30, 2020 of Provider Relief Funds and other
government grants recognized in other operating income
|
Adjusted Free Cash Flow
Adjusted Free Cash Flow is a non-GAAP liquidity measure that the
Company defines as net cash provided by (used in) operating
activities before: distributions from unconsolidated ventures from
cumulative share of net earnings, changes in prepaid insurance
premiums financed with notes payable, changes in operating lease
liability for lease termination, cash paid/received for gain/loss
on facility lease termination and modification, and lessor capital
expenditure reimbursements under operating leases;
plus: property insurance proceeds and proceeds from refundable
entrance fees, net of refunds; less: non-development capital
expenditures and payment of financing lease obligations.
Non-development capital expenditures are comprised of corporate and
community-level capital expenditures, including those related to
maintenance, renovations, upgrades, and other major building
infrastructure projects for the Company's communities and is
presented net of lessor reimbursements. Non-development capital
expenditures do not include capital expenditures for community
expansions, major community redevelopment and repositioning
projects, and the development of new communities.
The Company believes that presentation of Adjusted Free Cash
Flow as a liquidity measure is useful to investors because (i) it
is one of the metrics used by the Company's management for
budgeting and other planning purposes, to review the Company's
historic and prospective sources of operating liquidity, and to
review the Company's ability to service its outstanding
indebtedness, pay dividends to stockholders, engage in share
repurchases, and make capital expenditures, including development
capital expenditures; (ii) it is used as a metric in the Company's
performance-based compensation programs; and (iii) it provides an
indicator to management to determine if adjustments to current
spending decisions are needed.
Adjusted Free Cash Flow has material limitations as a liquidity
measure, including: (i) it does not represent cash available for
dividends, share repurchases, or discretionary expenditures since
certain non-discretionary expenditures, including mandatory debt
principal payments, are not reflected in this measure; (ii) the
cash portion of non-recurring charges related to gain/loss on
facility lease termination generally represent charges/gains that
may significantly affect the Company's liquidity; and (iii) the
impact of timing of cash expenditures, including the timing of
non-development capital expenditures, limits the usefulness of the
measure for short-term comparisons.
The table below reconciles the Company's Adjusted Free Cash Flow
from its net cash provided by (used in) operating activities.
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided
by (used in) operating activities
|
$
|
(77,169)
|
|
|
$
|
69,211
|
|
|
$
|
132,150
|
|
|
$
|
128,330
|
|
Net cash provided by
(used in) investing activities
|
(48,554)
|
|
|
(70,056)
|
|
|
(343,964)
|
|
|
(150,355)
|
|
Net cash provided by
(used in) financing activities
|
96,668
|
|
|
(8,755)
|
|
|
403,192
|
|
|
(112,834)
|
|
Net increase
(decrease) in cash, cash equivalents, and
restricted cash
|
$
|
(29,055)
|
|
|
$
|
(9,600)
|
|
|
$
|
191,378
|
|
|
$
|
(134,859)
|
|
|
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
(77,169)
|
|
|
$
|
69,211
|
|
|
$
|
132,150
|
|
|
$
|
128,330
|
|
Distributions from
unconsolidated ventures from
cumulative share of net earnings
|
(766)
|
|
|
(858)
|
|
|
(766)
|
|
|
(2,388)
|
|
Changes in prepaid
insurance premiums financed with
notes payable
|
(5,841)
|
|
|
(6,215)
|
|
|
5,823
|
|
|
5,875
|
|
Changes in assets and
liabilities for lessor capital
expenditure reimbursements under operating
leases
|
(3,131)
|
|
|
(11,043)
|
|
|
(13,640)
|
|
|
(12,043)
|
|
Non-development
capital expenditures, net
|
(22,872)
|
|
|
(59,121)
|
|
|
(104,949)
|
|
|
(180,187)
|
|
Payment of financing
lease obligations
|
(4,548)
|
|
|
(5,549)
|
|
|
(14,312)
|
|
|
(16,502)
|
|
Adjusted Free Cash
Flow (1)
|
$
|
(114,327)
|
|
|
$
|
(13,575)
|
|
|
$
|
4,306
|
|
|
$
|
(76,915)
|
|
|
|
(1)
|
Adjusted Free Cash
Flow includes transaction and organizational restructuring costs of
$6.3 million and $3.9 million for the three months ended September
30, 2020 and 2019, respectively, and $11.6 million and $5.0 million
for the nine months ended September 30, 2020 and 2019,
respectively. Additionally, Adjusted Free Cash Flow
includes:
|
|
|
|
For the three months
ended September 30, 2020:
|
|
•
|
$119.2 million
one-time cash lease payment
|
|
•
|
$2.5 million benefit
from accelerated/advanced Medicare payments received
|
|
•
|
$4.4 million benefit
from Provider Relief Funds and other government grants
accepted
|
|
•
|
$23.6 million benefit
from payroll taxes deferred
|
|
|
|
For the nine months
ended September 30, 2020:
|
|
•
|
$119.2 million
one-time cash lease payment
|
|
•
|
$100.0 million
benefit from management agreement termination fee payment received
from Healthpeak
|
|
•
|
$87.5 million benefit
from accelerated/advanced Medicare payments received
|
|
•
|
$38.6 million benefit
from Provider Relief Funds and other government grants
accepted
|
|
•
|
$50.1 million benefit
from payroll taxes deferred
|
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SOURCE Brookdale Senior Living Inc.